Now, The Hard Part

For E. Europe, Revolution Was Easier Than Change To Market Economy

July 29, 1990|By R.C. Longworth, the Tribune`s chief European correspondent.

LONDON — Visitors from Prague report that cabbages and Marxist textbooks are on sale by the pound in shops near Charles University. A pound of cabbage costs more than a pound of Marx.

It would be nice to conclude that, from top to bottom, the market has as thoroughly, and as easily, replaced planning and liberty has replaced communism since Eastern Europe`s revolutions of 1989. But the real work, in Czechoslovakia and elsewhere, has just begun.

Across the river from Charles University, Czechoslovakia`s non-Communist government dithers over how, and how fast, to move to a market economy. Critics of President Vaclav Havel say he doesn`t understand economics and isn`t sure he really wants to move to the market. Meanwhile, eight months after its two weeks of revolution, Czechoslovakia seems stalled.

``If countries wait too long, they may be left out of the race,`` said Tomasz Telma, an economist at PlanEcon, a Washington-based think tank that monitors Eastern European economies.

``If a (Western) company wants to invest in Eastern Europe in the next 10 years, it`s not going to wait for Czechoslovakia to decide to finish its reform program.

``The danger of these countries staying permanently behind Western Europe is very real.``

The revolutions were the easy part. The former Soviet bloc, including the Soviet Union itself, is finding it is simpler to overthrow a Communist regime than to build democracy and a modern economy on its ruins. Earlier hopes that decades of communism could be overcome in two or three years seem wildly optimistic.

Politically, all these countries have held elections. But democracy is more than an electoral system. Except for Hungary, none has political parties with platforms that go beyond anti-communism. Press freedom is rudimentary, and new newspapers find their growth blocked by government controls on paper and distribution networks.

The bureaucrats who ran Communist regimes are still in place. The panoply of democracy-independent courts, access to information, a non-political civil service-is only now being set up.

Militarily, things are brighter. Most experts, including U.S. Defense Secretary Dick Cheney, say the pullback of Soviet troops from Hungary and Czechslovakia, due to be completed by mid-1991, is on schedule. Moscow has agreed to withdraw its massive army from a united Germany within four years;

its smaller contingent in Poland should be gone by then.

Economics is where the big problems lie. Moscow and its former allies are in a ``deep recession`` that will last at least two years, according to Andreas Luecke, a specialist on Eastern Europe at the Association of German Industries in Cologne.

``Most commentators assume that prosperity follows hot on the heels of the political liberation of Eastern Europe,`` said David C. Roche, a Morgan Stanley analyst in London. ``However, although I believe the road we are traveling on in Eastern Europe leads in only one direction and there is no going back, it twists and turns its way through the mountains of difficulties which these countries are likely to encounter long before they reach prosperity.``

Another Morgan Stanley analyst, Barton Biggs, is even gloomier.

``Everyone seemed to think that all Eastern Europe and the Soviet Union had to do was to declare capitalism and free markets, and their troubles were over,`` Biggs wrote. Instead, he said, they are ``falling into an inflationary depression . . . People are losing their jobs and incomes at a time that prices of essentials are soaring.

Instead, the countries of the former East bloc have governments in which new parties and power blocs are being formed daily (Soviet Union), or are led by revolutionary umbrella organizations that have not yet dared to take tough economic decisions (Czechoslovakia and Romania) or that rest uneasily on coalitions (Hungary).

Poland`s dramatic, go-for-broke economic reform is endangered by the split between Lech Walesa and the Solidarity-run government.

Roche and other analysts say there are several reasons for this

``inflationary depression:``

- The countries are removing subsidies that kept prices artifically low-so low that, in Poland, bread was cheaper than the grain that went into it, leading farmers to feed loaves of bread to their livestock. Result: with subsidies going or gone, prices are soaring and families must scrimp.

- Factories and other businesses that never had to compete now must learn how to compete. Most are cutting employees. But many can`t do it and are folding. Result: unemployment-some 450,000 jobless in Poland alone. The CIA predicts this figure will more than triple by year`s end.